It is everyone’s dream to own a home. A majority of Kenyans rush for mortgage facilities, loans from Saccos and other credit facilities to purchase homes.
In January 2022, car and homeowners defaulted on loans totalling Ksh27.8 billion in the 12 months to September 2021.
The Central Bank of Kenya (CBK) in its quarterly economic review detailed that homeowners’ defaults rose by 20 per cent or Ksh11.5 billion after the defaults increased from Ksh57.7 billion to Ksh69.2 billion.
Defaulters were said to have serviced mortgages from their paychecks as businesses lost their incomes during the pandemic.
Investopedia, one of the world’s leading financial sites educates on saving options for people who are committed to owning a home
Here are viable options for saving for a home.
Trim routine expenses
As you work and earn income, there are daily routines that inflate an individual’s expenses such as gym membership, filling up the gas tank and insuring the car, telephone bills, and set-top box subscriptions.
They might seem necessary but when all the month's bills are compounded that money could have been used to contribute to your mortgage plans.
Cut the luxuries
Luxuries are merely a want rather than a necessity. An individual will be distracted from one’s dream of owning a home. It is advisable to avoid big purchases of expensive clothes and vacations.
Aspiring homeowners should strictly budget their cash and open a savings account dedicated to mortgage payments.
Acquiring and refurbishing a house.
An individual can acquire a house that is below market value through auctions or advertisements in social media or print media.
The strategy behind this move is to acquire the property and refurbish it gradually. There should be a breakdown of costs to avoid overspending on the refurbishment. This is an effective way to save on money and increase the resale value of the property in the future.
Utilize Retirement mortgage benefits
The Retirement Benefits Mortgage Loans Amendment Regulations, 2020 which was gazetted by the Treasury gave members of pensions schemes authority to use 40 per cent of their savings on a house purchase.
This is a better alternative to the old amendment that exclusively allowed 60 per cent of pension deposits to be used as collateral.
At the moment, members of the pension scheme can access funds up to Ksh 7 million from their pensions to buy a house.
Redirect Financial bonuses to Mortgage payments
For individuals who enjoy corporate bonuses at the end of the year, if an individual is eligible for tax refunds from the Kenya Revenue Authority(KRA) it would be wise for the person to redirect the finances to mortgage payments.
The finances can also be directed to a fixed account or a savings account which will earn compound interests over time.
Sharing your goal with family and spouse
It is important to inform your spouse or family of your goals of finally owning a home. This is an important part of presenting progress and accounting for your potential financiers.
Your parents or spouse may be encouraged by the progress and decide to shorten the period of owning a home by contributing financially.
